B u f f a l o N e w s S p e c i a l R e p o r t The High Cost of Being Poor A FOUR- PART SERIES REPRINTED FROM JUNE 18-21, 2006 Buffalo News Special Report: Reprinted From June 18 -21, 2006 THE HIGH COST OF BEING POOR CONTENTS The series day-by-day An idea takes shape Day One /Page 3 In November 2005, about half-a-dozen Buffalo Over five months, • Banks and supermarkets leave News reporters and editors sat in a circle and began poor neighborhoods, forcing brainstorming story ideas. As part of a two-day train- residents there to pay higher prices ing session conducted by the Committee of Concerned Epstein and Watson for food and financial services. Journalists, the News staffers were looking for story • Buffalo News reporters ideas that would be worth an extended investment conducted more find neighborhood stores are of time and resources. charging illegal check-cashing fees. Jonathan Epstein, a News financial reporter who • Low-income customers face higher bank fees than more specializes in banking and insurance issues, suggested than 120 interviews. affluent customers. it might be worth taking a hard look at the lack of banks in some communities and the outrageous fees They, and other Day Two /Page 9 check-cashing businesses were charging poor people who had no other alternative. Epstein also talked • The poor turn to rent- reporters, also went to-own stores – which about the harm done to unsophisticated home buyers often charge three to four times who found themselves trapped by predatory lenders the price of traditional retailers. who loaned money at rates much higher than market out to personally • Tax preparers give loans at value. Another member of the group mentioned the astronomical rates. extraordinary markups of rent-to-own stores. Together, the group felt, all these things might be cash checks to woven into a compelling series about the obstacles Day Three /Page 11 faced by the working poor. confirm what they • The world of predatory loans News Editor Margaret Sullivan and Managing hurts low-income homeowners Editor Jerry Goldberg were intrigued by the idea, and had been told by and neighborhoods. agreed this would be a project worth a significant • Insurance costs are higher in investment in time and resources. What resulted was low-income neighborhoods. a four-part series called, “The High Cost of Being Poor,” Buffalo residents. • How to spot a predatory loan. which ran from June 18 to June 21, 2006. It was • Lawmakers try to address predatory loans. written by Epstein and Urban Affairs Editor Rod Wat- • Car insurance rates are higher in the city than the suburbs. son, and edited by Projects Editor Susan Schulman, with photography by Harry Scull Jr. Day Four /Page 14 The response was immediate. On Monday, June 19, the day after Part I was published, New York State • Lawmakers, bankers, Banking Commissioner Diana L. Taylor said she would residents speak out on helping confer with police and prosecutors in Buffalo to see if the working poor. action should be taken against merchants charging il- legally high fees to cash checks. The next day, Paul Tokasz, majority leader of the state Assembly, an- nounced that the Assembly would hold hearings to Reaction to the News series find ways to strengthen oversight over check cashers, rent-to-own stores and “predatory” mortgage firms • City agency to block predatory home loans. Page 21 that prey on the working poor. • Licenses sought in check-cashing crackdown. Page 22 Take a look at the pages that follow, and you’ll see a • Spitzer urges more consumer protections. Page 22 world that often is invisible to middle-class journalists, • Rent-to-own on borrowed time? Page 23 but is a part of the everyday world of the working poor. Buffalo News Special Report: The High Cost of Being Poor • Page 3 Low-income workers face array of immoral–and illegal–charges Harry Scull Jr./Buffalo News The working poor have to surmount financial hurdles that seldom pose a problem for more affluent citizens. Among those are merchants who charge illegally high rates to cash checks, knowing that many low-income people have difficulty opening a checking account. By Rod Watson that fled to richer communities, and high-priced corner and Jonathan D. Epstein stores rush in where supermarkets fear to tread. NEWS STAFF REPORTERS Some of the costs are immoral. Others – like those at rent- DAY ONE to-own stores – stretch the letter of the law and are con- lma Medina forked over $20 to cash a check The High demned by the state attorney general. Still others – the fees at a corner store because she didn’t have a Cost of charged by unlicensed check cashers – are downright illegal. checking account. Being Poor And even when mainstream institutions are nearby, Nicole Hennegan turned to a rent-to-own 1 their services don’t always help those struggling on the mar- A store to buy a used TV, only to find a similar gins of this region’s anemic economy. set would cost one-third as much at Kmart. Have $15,000 in your savings account? You’ll get overdraft Chanell Rose paid what amounted to 180 percent in annual inter- protection, free money orders and all the other perquisites of middle- est for a two-week loan against the income tax refund she needed to class status. pay medical bills. Have only $50 in your account? You’ll get socked in the wallet And Mona Lisa and Demetrius Wilson lost their home because of at every turn. the interest and fees that came with their pricey mortgage. “I went over by $1 one time [at a bank ATM], and they charged me Welcome to the world of the working poor, where people with the $30,” said Juanita Smith, a public housing tenant raising four children. least end up paying the most to make it from day to day. It’s a common lament. Call it the high cost of living on a low income. In this world, rent-to-own franchises are more prevalent than department stores, check cashers and predatory lenders replace banks See Poor Page 4 Buffalo News Special Report: The High Cost of Being Poor • Page 4 JUANITA SMITH, A PUBLIC HOUSING TENANT RAISING FOUR CHILDREN: “I went over by $1 one time (at a bank ATM) and they charged me $30.” Neighborhood market prices can be 60 percent higher In the inner city, by contrast, it’s POOR • From Page 3 primarily the corner store. It’s a kind of one-stop shopping with an expen- It’s a cycle of fees, penalties and higher sive twist: You can cash checks and prices that grab low-income people by buy food, but instead of paying less, the financial ankle, pulling them deep- everything costs more. er into the hole no matter how hard “The check can be $25, and they fight to crawl out. they’re taking $5 or $6,” said Hen- Many of the costs – like paying a negan, a 23-year-old telemarketer hefty premium to cash a check, buy a who lives in Ferry-Grider public house or get a car loan – seem housing with her 7-year-old son. She unimaginable to most. But they’re an was describing the check-cashing everyday experience for those on the fees at delis and gas minimarts that margins, or below. proliferate on the East Side like air Low-income people pay these costs rushing in to fill a vacuum. every day. For bigger checks, particularly gov- The Buffalo News talked to more ernment-issued checks, the fees can than 120 residents, anti-poverty ex- Harry Scull Jr./Buffalo News be more – much more. In fact, they perts, community activists, bankers, A former Marine Midland bank sits idle on the corner of Genesee can run up to 10 percent of the face merchants, check cashers, home and Moselle streets. There are only 18 bank branches left on the value of the check. And unlike at the builders and government regulators. East Side – a quarter of the 72 in the city – and most of those 18 bank, the cost often varies depending Reporters also researched prices at are on the outskirts of the inner city. on who’s behind the counter. stores, check cashers and rent-to-own Medina – a mother of three who outlets to get a picture of what life is has done workfare and janitorial jobs like for those swimming upstream in World of the unbanked since returning from Puerto Rico last a river of red ink. A national look at the population without banking accounts fall – recalls paying $15 or $20 at a “I can’t get ahead. It’s frustrating. and services Grant Street liquor store to cash $200 It’s stretching me in too many ways,” checks. said Smith, her voice trailing off as Number of adults 10.2 million, or 5% of U.S. population “For me, it depends on what mood she decried the undertow of extra Sex 54% women, 46% men they’re in,” the 24-year-old said of the costs that keep people like her from Race 72% white, 25% black store clerks. ever overcoming financial mistakes Age 42% under 35; 25% over 55 Rose seconds that, after paying $21 or bad breaks. Occupation More than half unemployed. at a William Street market to cash her “It’s a fairly universal truth that Of those who work, 33 percent are blue-collar son’s $210 state benefit check.